Fidelity data: Savers do better, but not well

By Matthew Heimer

Journalists who follow the health of the 401(k) system (or as we like to call ourselves, the glitterati) tend to draw big red circles around the release dates for quarterly updates from Fidelity Investments. With 12 million 401(k) accounts under its management, “Fido” is one of the 800-pound gorillas in the retirement-savings industry, and its reports on its account-holders offer one of the bigger and more clearly representative windows on the health of the American nest egg.

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MarketWatch’s Andrea Coombes tackled this quarter’s report, released this morning, and let’s just say it includes fodder for optimists and pessimists alike. On the bright side, the average 401(k) balance at the end of the third quarter was up 18% from a year ago, suggesting that the average saver was successfully harnessing a rising market. But the overall size of those savings tends to be what Coombes describes as “starkly insufficient.” Savers aged 55 to 59 who’d been contributing to a Fidelity account for at least 10 years had an average balance of $250,000, which sounds fairly impressive until you compare it to the target that Fidelity recommends — eight times your salary by the time you retire.

Lots of caveats apply here, of course, especially since many affluent consumers have retirement savings and other assets outside their 401(k)s. But Coombes says that, at the very least, those with 401(k)s could and should be saving more in them. The average contribution rates in Fidelity’s accounts ranged from 3.7% of salary to 8.4%; as Coombes notes, “Ideally, workers should save at least 10% to 15%.”

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About Encore

Encore looks at the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities, needs and priorities of people saving for and living in retirement. Our lead blogger is editor Matthew Heimer, and frequent contributors include editor Amy Hoak, writer Catey Hill, and MarketWatch columnists Elizabeth O’Brien, Robert Powell and Andrea Coombes. Encore also features regular commentary from The Wall Street Journal retirement columnists Glenn Ruffenach and Anne Tergesen and the Director of the Center for Retirement Research at Boston College, Alicia H. Munnell.